Polish, Danish Firms Strike Baltic Pipe Deal

Polish Oil and Gas Co. (PGNiG) and Energinet.dk have worked out an agreement with regard to the implementation of a direct gas pipeline project between Poland and Denmark (Baltic Pipe).

The agreement with Energinet.dk on the development of the Baltic Pipe project makes part of the policy to connect Poland with Scandinavian fields, which is currently pursued by PGNiG. The Baltic Pipe is linked with the Skanled project--i.e., the gas pipeline that will connect Norway with Sweden and Denmark--with potential extension to Poland through the Danish gas transportation system.

"The understanding with Energinet.dk is an important step towards achievement of our strategic goal, i.e., diversification of the directions of gas supply to Poland," said Krzysztof G³ogowski, President of the Management Board of PGNiG. "Furthermore, PGNiG is analyzing the options for transmission of gas from its Skarv and Snadd fields and for the imports of Norwegian gas through the Skanled pipeline using the Danish pipeline grid and the Baltic Pipe."

PGNiG will consider the possibility of financing the investment into the Baltic Pipe project independently. This would mean that, at the same time, the pipeline would be owned by the Polish Oil and Gas Co.

Due to commercial considerations, PGNiG and Energinet.dk will also prepare an option that provides for the possibility of supply between Poland and Denmark in both directions. From this perspective, the Baltic Pipe can be looked at as an interconnection project that will give both parties increased flexibility in shaping their commercial policy.

The cooperation with Energinet.dk with respect to gas supply and transmission projects in the European liberalized market is yet another example of the growing international activity of PGNiG. The Steering Committee of the Consortium established for the development of the Skanled project, during its meeting held Friday in Oslo, accepted the application of PGNiG for participation in the Consortium. The process of formal accession of PGNiG to the Consortium is expected to be finalized by the end of May 2007.

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